US economy contracted 0.2% in first quarter

(Sharecast News) - The US economy shrank in the first three months of the year quarter of the year, according to revised official data that confirmed the first contraction since 2022.

Gross domestic product shrank by 0.2%, according to the final estimate released from the Bureau of Economic Analysis. Preliminary estimated that GDP had fallen by 0.3%.

The fall, compared with a 2.4 percent expansion in the final quarter of 2024, was driven partly by weaker consumer spending and an increase in imports as Americans bought foreign goods before tariffs imposed by US President Donald Trump came into effect.

It puts the world's biggest economy on the brink of a technical recession, which defined by two quarters of negative growth.

Trump, who effectively declared war on all of America's trade partners in April, is widely expected to hit the domestic economy later this year. The International Monetary Fund in April slashed its outlook for growth this year to 1.8% from 2.7% in January.

His policies were thrown into further turmoil on Wednesday when the US Court of International Trade ruled that Congress alone had exclusive authority to regulate commerce with other countries, and that presidential powers to safeguard the economy did not overrule that.

The ruling invalidates most of Trump's tariffs with immediate effect. The administration has been given ten days to dismantle the regime.

Markets rallied following the judgement and the dollar strengthened. The White House said it would appeal, however, and claimed it was "not for unelected judges to decide how to properly address a national emergency".

Trump unveiled his sweeping tariff regime on 2 April, upending markets and sending shockwaves through global trade. A number of major trading partners, including the European Union and China, imposed their own reciprocal duties in response.

Trump argued he was able to impose the swingeing taxes - including a baseline 10% on all countries - without the approval of Congress under the International Emergency Economic Powers Act (IEEPA). The act gives the US president authority to address "unusual and extraordinary" threats during a national emergency.

But the New York court's three judges found that Trump's "worldwide and retaliatory tariff orders exceed any authority granted to the president by IEEPA".

The ruling could also see the various trade talks the US is holding worldwide grind to a halt.

The case, which did not address tariffs on cars, steel or automobiles, was brought by a number of US states and small businesses. The White House used another statue to impose sector-specific tariffs, and so remain unaffected by the court's ruling.